Stock market response to CSR announcements: an event study of the Finnish pulp and paper industry
Bobbie, Daniel (2017)
Pro gradu -tutkielma
Bobbie, Daniel
2017
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi-fe201710068913
https://urn.fi/URN:NBN:fi-fe201710068913
Tiivistelmä
Corporate social responsibility (CSR) has become a current issue for companies when making economic decisions. The studies of CSR on market returns have received special attention from scholar and there is a need to examine the pulp and paper industry in Finland in relation to CSR. The purpose of this thesis is to study and evaluate the impact of the CSR announcements made by UPM-Kymmene and Stora Enso on their stock returns, as well as on the returns of the OMX Helsinki Forestry and Paper Index.
The daily stock returns between 2nd January 2004 and 30 December 2014 were used for this study. The sample consisted of 63 CSR announcements, of which 38 were collected from UPM and 25 were collected from Stora. The impact of CSR on the market was tested using the event study methodology.
There were no signs of any significantly abnormal average return (AAR) for the companies and the index. However, based on the cumulative abnormal average return, there were significant negative and positive responses to the CSR announcements in the market. The results of the Environmental, Social and Governance (ESG) tests show that investors responded significantly more to corporate governance news than to environmental and social information. There was also some evidence of CSR announcements having a spillover effect on the index. While the spillover effect was documented for the Stora stock rising because of UPM news, the reverse spillover did not occur. It was found that investors generally do not react quickly to eco-friendly corporate initiatives and to bad corporate social initiatives; there is a delayed reaction. On the period 5 to 10, good news generated a cumulative abnormal return of 0.61%, and bad news caused the stocks to drop by −0.57%.
The daily stock returns between 2nd January 2004 and 30 December 2014 were used for this study. The sample consisted of 63 CSR announcements, of which 38 were collected from UPM and 25 were collected from Stora. The impact of CSR on the market was tested using the event study methodology.
There were no signs of any significantly abnormal average return (AAR) for the companies and the index. However, based on the cumulative abnormal average return, there were significant negative and positive responses to the CSR announcements in the market. The results of the Environmental, Social and Governance (ESG) tests show that investors responded significantly more to corporate governance news than to environmental and social information. There was also some evidence of CSR announcements having a spillover effect on the index. While the spillover effect was documented for the Stora stock rising because of UPM news, the reverse spillover did not occur. It was found that investors generally do not react quickly to eco-friendly corporate initiatives and to bad corporate social initiatives; there is a delayed reaction. On the period 5 to 10, good news generated a cumulative abnormal return of 0.61%, and bad news caused the stocks to drop by −0.57%.